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Investing.com - Wells Fargo (NYSE:WFC) has raised its price target on Arm Holdings (NASDAQ:ARM) to $175 from $145 while maintaining an Overweight rating on the stock. According to InvestingPro data, ARM’s stock has gained over 27% year-to-date and currently trades at a P/E ratio of 209x, reflecting high growth expectations.
The firm cited continued artificial intelligence data center momentum as a key driver for Arm’s expected royalty revenue growth in fiscal 2026, with recent data showing Arm-based server CPU shipments accelerated 104% year-over-year in the first calendar quarter of 2025. This growth trajectory aligns with ARM’s strong financial health, as indicated by its impressive 97% gross profit margin and 24% revenue growth over the last twelve months.
Despite not providing formal fiscal 2026 guidance due to tariff uncertainty, Arm previously indicated royalty revenue would grow in the high-teens to low-twenties percentage range year-over-year, which Wells Fargo believes could see a modest increase in the upcoming earnings report scheduled for July 30. Get deeper insights into ARM’s valuation and growth prospects with InvestingPro, which offers 12 additional exclusive tips and comprehensive financial analysis.
The price target increase also reflects semiconductor index multiple expansion, with Wells Fargo applying an 83x price-to-earnings ratio and 68x enterprise value to EBITDA multiple on its calendar 2026 estimates.
Wells Fargo expects Arm to maintain above-target annual contract value and licensing revenue growth around 20% year-over-year, driven by accelerating license demand tied to AI computing needs, while noting investor focus may increasingly turn to Arm’s rising R&D spending amid reports of internal chip development efforts.
In other recent news, Arm Holdings has seen several noteworthy developments. Mizuho (NYSE:MFG) raised its price target for Arm Holdings to $180, maintaining an Outperform rating, while keeping its June quarter revenue and EPS estimates at $1.07 billion and $0.35, respectively. Guggenheim also increased its price target to $187, citing improved visibility in Arm’s license revenue, which is expected to boost royalty revenue growth over the next few years. Meanwhile, BNP Paribas (OTC:BNPQY) Exane upgraded Arm from Neutral to Outperform, nearly doubling its price target to $210, highlighting Arm’s emerging role in the ASIC chip market. Goldman Sachs initiated coverage with a Neutral rating and a $160 price target, noting Arm’s dominance in the smartphone market and potential in the datacenter segment. Benchmark reiterated its Hold rating, citing Arm’s premium valuation despite recognizing its strong fundamental performance drivers and growth prospects in AI PCs, data centers, and other segments. These developments underscore Arm’s strategic positioning and diverse revenue streams, as well as its ongoing expansion beyond traditional markets.
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